More love for music subscriptions

iHeartRadio launched a new music-subscription service with multiple tiers for increasing sets of features. The first tier costs $5 per month, allowing users to replay and skip songs, and listen offline. The second costs $10 per month and provides a full on-demand suite of songs, similar to Spotify. Here’s why the launch is important for the music streaming industry:

Subscriptions are the future of online music. It seems inevitable that every music streaming service will eventually offer a premium subscription tier. Music subscriptions will account for 78% of total US streaming music revenue in 2020, compared with 67% in 2016, according to a recent study from Activate.

Subscription growth will outpace ad-supported models over the next four years.Total streaming music revenue will reach $6.5 billion in 2020, advancing at a four-year compound annual growth rate (CAGR) of 17%. This will be largely driven by subscription services revenue, which is set to increase at a CAGR of 22%, while ad-supported revenue will grow at a 5% CAGR.

Unique features will keep subscriber sticky. As vast song libraries are becoming ubiquitous among online streamers, unique features are becoming more important to users. According to Activate, personalized playlists, recommendations, slick user interfaces, and other enhancements that reduce friction (i.e. voice integration) will likely be the features that retain users and attract new ones.